Payroll Software: Understanding the Signs for Change

Changing Payroll Software Providers: 4 Drivers That Mean It’s Time

Historically speaking, organizations have often shied away from wholesale change when it comes to replacing payroll software. Whatever the shortcomings of the current solution may be, the “rip and replace” option has tended to be deployed only when all else has failed; in large part due to the perceived difficulty of a fresh implementation. And while many analysts and pundits have written about this topic extensively, a 2012 case study from Mint Jutras (addressing this issue from an ERP system perspective) provides the most cogent analysis of what this reticence to change is truly about. Specifically, Mint Juras’s report highlights that “Rip and replace was avoided at all cost, even when there was no possible way the existing solution or its underlying architecture could keep pace with new market drivers an changing business needs”. Not only that though, Mint also concluded that “Upgrades were viewed as difficult and painful but a reimplementation was often seen as pure evil”. Strong words indeed, but no less true.

Of course, there are numerous reasons why an organization might choose to remain with a legacy payroll software system. After all, there is a healthy amount of truth to the adage of “if it ain’t broke don’t fix it”. Take the restraining factor of the provider relationship for example; for many companies the prospect of having to start fresh with a new vendor is just too daunting. Likewise, payroll software implementations have a long track record of failure—a fact that very few companies are anxious to test the theory of. But Cloud payroll solutions are slowly beginning to change this view by dispensing with the expense and time of a physical on-premises installation; offering rapid implementation of updates, and often at lower costs (or at the very least a subscription model which can be classified as an operating cost rather than a capital expense). In turn, these actions are driving client organizations to be more open to change—particularly when there is concrete reason for it. So, here at Payroll Lab, we want you to evaluate your current payroll processes. Is it everything you need? Take a look at the following four drivers. While far from exhaustive, if any of these feel like they’re hitting a bit too close to home, it may be time to rethink your strategy for change.

Payroll Software Change Driver #1: Changing Business Goals

Strategic directions can change, particularly in times of global economic crisis when costs need to be cut. Many organizations are now operating differently and with different aims in mind compared to 2008. If you’re still using the same payroll software, it may not be supporting your post-crisis business. As an article in Pay & Benefits magazine in July 2012 points out, “Replacing a manually intensive payroll system with a more automated, streamlined system could form part of the business’ efforts to cut costs and improve efficiencies in line with its 12-month goal”.

Payroll Software Change Driver #2: Changing Organization

New people like to make changes. And a change at the C-level in the areas of HR, finance, or IT often brings new ideas and can easily lead to a system shake-up. Just take the most recent example of Yahoo’s new CEO; the changes she has made thus far have been staggering. On a wider note though, downsizing, upsizing, mergers & acquisitions, staffing restructurings, and office moves, can all prompt a review of current systems; especially antiquated payroll processes. In the M&A example, the rationalizing of potentially competing legacy systems might lead to a decision to start afresh and purchase a new solution better-suited to the new organization.

Payroll Software Change Driver #3: Changing Legislation

Of all the external factors that can prompt a change of payroll solution, changes to legislation is something of an unstoppable force. If your software isn’t flexible enough to respond to changing employer responsibilities then it’s time to go shopping. A current example in the UK, is the introduction of a real time information tax system, requiring employers to electronically submit tax and deductions information to HMRC (Her Majesty’s Revenue & Customs) every time they run payroll; and a stiff upper lip will only get you so far when it comes to that regulatory compliance.

Payroll Software Change Driver #4: Obsolescence

Finally, it’s important to note the simple point that there comes a time in the lifespan of even the best software when the vendor/developer moves on to the new & improved package and ceases to support the old solution. At this point in the cycle, the clock is ticking and a change becomes certain, it’s merely a question of when. For example, countless customers of Oracle’s PeopleSoft and SAP’s on-premise solution are choosing to remain on their current release; waiting to see what will happen with the Payroll and HR software industry. Does that sound like your organization? Simply running out the clock until you have to make a decision?

Changing Payroll Software – Final Thoughts

Of course, if the above points resonate with you, and you’ve decided that a change of payroll software is required, the question then becomes: when is the best time to change? Though too lengthy of discussion to continue in this blog post, Sage’s Complete Buyer’s Guide for Payroll Software suggests that, as a general rule, companies should look to the certain points in the annual tax cycle that make the most sense. For example, immediately after quarter-end or year-end are typically the best times to consider replacement. After all, starting at the beginning of a new year means reduced data migration (as balances are starting at zero); and furthermore avoids the need to translate data between differing systems.

In a nutshell, it’s time to change a payroll solution when the current system simply can’t do what the organization wants it to do. The demands that the system can’t handle may stem from structural changes, a refocused strategic goal or just a new Chief Finance Officer who wants to import his or her favorite system and these different drivers may affect the level of broader corporate support to varying degrees. Ultimately, despite all payroll solutions sharing the same bottom line function – pay people the right money at the right time – functionality varies considerably as does vendor reliability and as a business evolves, so will its payroll requirements.

Whatever the shortcomings of the current solution may be, the “rip and replace” option has tended to be deployed only when all else has failed; in large part due to the perceived difficulty of a fresh implementation."